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Restaurants and pubs in James Street in London, the United Kingdom, on Friday, December 13, 2024.
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The economy of the United Kingdom grew 0.1% in the fourth quarter, exceeding expectations, according to a preliminary estimate of the United Kingdom office for national statistics (ONS) on Thursday.
The economists surveyed by Reuters expected the country’s GDP to contract 0.1% in the previous three months.
The British economy had registered zero growth in the third quarter and has seen monthly data of mediocre GDP since then, with a contraction of 0.1% in October and a 0.1% expansion in November.
Slow growth and A recent fall in inflation caused the bank of England last week To make your first interest rate cut of the yearreducing its reference rate to 4.5%.
The Central Bank said that more rates cuts were being arrived as inflationary pressures decreased, but noted that the highest global energy costs and regulated price changes are expected to increase the inflation of the owners at 3.7% in The third quarter of 2025, even when underlying national inflationary pressures are expected to decrease more. “The BOE expected the inflation rate return to its 2% target for 2027.
The Central Bank also reduced the forecast of economic growth of the United Kingdom from 1.5% to 0.75% this year.
The bad economic performance will stack additional pressure on the Chancellor of the United Kingdom, Rachel Reeves, whose Fiscal plansAnnounced last fall, they have been criticized for increasing tax burden in British companies. Critics say that the plans, that increase the amount that employers pay in the contributions of the National Insurance (NI), a profit tax, as well as an increase to the national minimum wage, could damage the investment, jobs and growth .
Foreign Minister Reeves defended the “autumn budget”, saying that their fiscal increases in £ 40 billion were needed to finance public spending and that it is prioritizing economic growth.
2025 degraded growth
Economists widely expected the British economy to end the year with a low note and also degraded their growth forecasts by 2025.
“The highest taxes for companies, a persistent drag of previous interest rates and the softest demand abroad explain why we have reviewed our GDP growth forecasts of the United Kingdom, from 1.3% to 0.5% for 2025 and 1.6% to 1.5% by 2026 “. Paul Dales, chief economist of the United Kingdom in Capital Economics, said in a note this week.
View of the horizon of the city of London looking on the Thames river and the Waterloo bridge at sunset on February 10, 2024 in London, the United Kingdom.
Mike kemp | In images | Getty images
Sanjay Raja, a senior economist of Deutsche Bank, agreed, saying that short -term degradations to the 2025 growth perspective of the United Kingdom were “inevitable.”
“Bardear any important review, the negative transmission effect of (the fourth quarter of 2024) will automatically drag in our growth forecast of 2025 of 1.25%. How much degrade did we be seeing? Approximately 0.25 percentage points, at least,” he said In a research note this week.
“There are also more bad news. The survey data to start the year have also not shown any recovery. The downward risks for our first quarter of 2025 GDP growth GDP (growth of 0.3% of quarter to quarter ) The data that point to only a modest rebound are increasing with the last PMI to start the year.
“Without a doubt, commercial uncertainty will remain for some time,” he added.
Tariff threat
The president of the United States, Donald Trump, threatened to impose tariffs on the assets of the European Union and the United Kingdom, but has indicated that Great Britain, with whom the United States has a more balanced commercial relationship, It could reach an agreement to avoid taxes.
Certainly, the United Kingdom is hope that Trump’s tariff anger can avoid, and Reeves tells CNBC last month than The United Kingdom “is not part of the problem” When it comes to “persistent” commercial deficits that the president wants to address.
The president of the United States, Donald Trump, inspected an honor guard during a welcome ceremony at Buckingham Palace in downtown London on June 3, 2019, the first day of his three -day state visit to the United Kingdom
Mandel and | AFP | Getty images
Last week, the Bank of England declared that any potential American tariffs on Great Britain “could be inflationary or disinflar for the United Kingdom, depending on the commercial policies of other countries and the relative force of the different transmission channels.”
“Most of these channels would act to reduce the economic activity of the United Kingdom. However, some channels are likely to reduce the United Kingdom inflation, while others could increase it,” said the Central Bank.
The lowest American export demand in the United Kingdom would be deflation, for example, but supply chain interruptions due to missing components could lead to short -term price peaks, the BOE said.
